John B. Sanfilippo & Son, Inc (NASDAQ:JBSS) Management Interview

John B. Sanfilippo & Son, Inc.
CFO: Michael Valentine



Interview Transcripts:

Juan Costello: Good day from Wall Street. This is Juan Costello, senior analyst with The Wall Street Reporter. And joining us today is Michael Valentine, the Chief Financial Officer for John B. Sanfilippo & Son Incorporated. The company trades on NASDAQ and ticker symbol is JBSS. Thanks for joining us today Mike.

Michael Valentine: It’s my pleasure.

Juan Costello: Great. Now starting off, give us a brief history and overview of the company for some of our listeners here that are new to your story.

Michael Valentine: JBSS was founded in 1922 as a pecan sheller. In the 1960s, the company branched out into processing other nuts primarily in the industrial channel and that would be bulk nuts for other food manufacturers. In the 1970s, the company acquired a [Indiscernible] [0:00:56] operation with the Evon’s brand of nuts and got into the consumer channel, also began doing some private label baking nuts. In the 1980s, the company expanded its vertical integration strategy where it became a peanut sheller. And then in the 90s, the company was very inquisitive, purchased a walnut sheller, another industrial nut supplier and also the Fisher brand among a few others. That really spurred some significant growth on the top line with the company, and also made the company become a much more significant player in the consumer nut channel. In the 2000s, the company enjoyed significant topline and bottom line growth at least in the first half of the decade. Then in the latter part of the 2000s, with the low-car dietary craze that was out there, nut prices soared and the company struggled a bit with profitability. Since then we’ve righted that ship and returned to consistent profitability.

Juan Costello: Great. So talk about some of the current trends right now in the sector and how will the company’s position to capitalize as well as continue to grab market share.

Michael Valentine: Well right now, nut prices are again at historical highs as they were about seven years ago. And that’s primarily being driven by demand in emerging markets such as India and China. The company has spent really the last two years trying to get price increases. It has been successful and as a result of that is had some consistent margins especially in the current fiscal year. But it does create some issues in respect to volume especially under current economic conditions. Nut prices at retail are probably the highest we’ve ever seen.

Juan Costello: Right. And are there any other challenges that you see right now in the sector and what are some of the specific strategies for overcoming them?

Michael Valentine: That’s the primary challenge. As a sheller of pecans, walnuts, and peanuts, we do have some advantages versus our non-shelling competitors. We have better visibility in the crop conditions, can anticipate price changes, price increases especially these days sooner than our competitors and consequently, get our prices to our customers up more quickly so that our cost and selling prices are aligned properly. And that’s really the story of the current fiscal year, having properly aligned selling prices with the cost.

Juan Costello: Certainly. So anything else you feel makes the company unique from some of the other players in the sector?

Michael Valentine: That’s the primary differentiator. Another one that we always liked to point out is that we operate in four distribution channels where most of our competitors are single channel competitors. For example, we sell in the consumer channel, at all types of retailers in addition to that. Our commercial ingredients channel, we sell nuts into major food service distributors, major restaurant chains and also other major food manufacturers who use nuts as an ingredient. We also see under the export channel, both bulk, industrial products and also consumer products primarily in the Caribbean and also into Asia. And then finally, we have significant contract packaging sales base where we sell to other food manufacturers, primarily consumer products companies.

Juan Costello: Certainly. And perhaps you could walk us through your background and experience there Mike and talk a little bit about some of the key management team behind the scenes.

Michael Valentine: I joined the company in 1987. Prior to that, I was in public accounting. And then prior to that, I was in law school. When I joined the company in 1987, I was in operations and was in operations for approximately about 14, 15 years. Then that’s when I became Chief Financial Officer.

Other members of our team in addition to Jeff Sanfilippo and Jasper Sanfilippo Jr., our CEO and COO respectively, we brought in senior officers from large consumer products companies such as Kraft and Frito Lay, Pepperidge Farm. We also added Rob Charles. He’s our Senior VP of Strategy and Business Development. He also heads up our export efforts. He came from the investment banking sector. So we spent quite a bit of effort over the last four or five years upgrading our senior management team to allow us to meet some of our objectives and our strategic plan.

Juan Costello: Certainly. So what are some of those, I know you mentioned a few, but what are some of those goals and milestones that you and the team are hoping to accomplish here over the short term?

Michael Valentine: Our primary objective is to grow our branded business in the consumer channel under our Fisher Baking, Fisher Snack Nut and Orchard Valley Harvest Produce brands. That is our primary objective and our plan. We also have a secondary objective to grow with existing private label customers primarily through innovation with those retailers that value innovation in the nut category. And then finally, our third objective is to grow internationally and that’s primarily in China. We expect to open up a representative office in China here shortly and actually have sales employees in country to grow in what is just a very large nut market.

Juan Costello: Well good. And so as you continue to speak with investors and the financial community there, you’re recently at the [Indiscernible] [0:07:43] Conference. Do you think that the investment community fully understands the company’s full upside and story? And if not, what do you wish they better understood about you guys?

Michael Valentine: Well, I think they realize that our primary strategy to grow our branded business is something that will continue to help us decommoditize our business, get more pricing strength because nut prices can be pretty volatile. We also emphasize our procurement expertise. All of our buyers have at least 20 years of experience, that coupled with the fact that we shell some major nuts and have people out in the field throughout the whole growing cycle is extremely valuable. And then finally, we emphasized the three objectives that I discussed in our strategic plan and talked a little bit about how we’re going to execute those action plans to achieve those objectives. So I think those who look at that presentation which is on our website will get a much better understanding of where we’re going.

Juan Costello: Certainly. And joining us today is Michael Valentine, the Chief Financial Officer for John B. Sanfilippo & Son Incorporated. The company trades on NASDAQ. Ticker symbol is JBSS, currently trading at $15.75 a share. The market cap is north of 168 million. And before we conclude here Mike, to recap some of your key points, why do you believe investors should consider JBSS as a good investment opportunity today?

Michael Valentine: Well, we’re very well-positioned even in this high price market that we’re in to execute our objectives. Also, I want to point out that notwithstanding these high prices, consumers still consider nuts to be one of the healthiest foods to eat. We haven’t seen too much of a fall off in volume notwithstanding those prices which validates that. And we think as some of these nut prices come down especially cashews and peanuts, we’ll begin to see some volume increases again. And as I mentioned, I think we’re in a very good position to take advantage of that.

Juan Costello: Well we certainly look forward to continuing to track the company’s future growth and report on your progress. I like to thank you for taking the time to join us today and update our investor audience on JBSS.

Michael Valentine: And all of us at JBS appreciate the opportunity to speak with The Wall Street Reporter.

Juan Costello: Anytime.

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